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Payroll company ceases trading blaming VAT changes

Sprite said: “Please note that as a result of the recent Government budget announcement in relation to the introduction of the “Domestic VAT Reverse Charge to the Construction Industry” at 12.00 noon on the 5th of November 2018 Sprite Technical Services UK LLP has ceased to trade.”

The VAT change will not come into force until next October and is designed to stop “missing trader” fraud where labour suppliers charge and collect VAT before disappearing without handing it over to HMRC.

The change means contractors charge themselves VAT rather than suppliers.

It will have a huge impact on some payroll firms who currently use the VAT they collect as working capital and cash flow before paying it over to HMRC.

One industry expert said: “This will see some payroll firms’ cash flow drying up and will have massive knock-on effects.

“Come October next year their cash flows will hit the buffers because VAT will not pass through their hands.

“That VAT money is often used to offer construction clients credit creating a real house of cards.”